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Trade-Ideas: Theravance (THRX) Is Today's "Barbarian At The Gate" Stock

Stock quotes in this article: THRX

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Theravance ( THRX) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Theravance as such a stock due to the following factors:

  • THRX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $30.1 million.
  • THRX has traded 1.9 million shares today.
  • THRX traded in a range 258.7% of the normal price range with a price range of $3.06.
  • THRX traded above its daily resistance level (quality: 58 days, meaning that the stock is crossing a resistance level set by the last 58 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock s movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in THRX with the Ticky from Trade-Ideas. See the FREE profile for THRX NOW at Trade-Ideas

More details on THRX:

Theravance, Inc., a biopharmaceutical company, engages in the discovery, development, and commercialization of small molecule medicines primarily for therapeutic areas of respiratory diseases, bacterial infections, and central nervous system (CNS)/pain. Currently there are 5 analysts that rate Theravance a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Theravance has been 894,900 shares per day over the past 30 days. Theravance has a market cap of $4.1 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.51 and a short float of 21.1% with 11.98 days to cover. Shares are up 69.9% year to date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Theravance as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally high debt management risk.

Highlights from the ratings report include:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Biotechnology industry and the overall market, THERAVANCE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 5.37 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 11.52, which shows the ability to cover short-term cash needs.
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Biotechnology industry average. The net income increased by 1.9% when compared to the same quarter one year prior, going from -$37.12 million to -$36.43 million.
  • THRX, with its decline in revenue, underperformed when compared the industry average of 9.4%. Since the same quarter one year prior, revenues slightly dropped by 7.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • THERAVANCE INC has improved earnings per share by 11.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, THERAVANCE INC continued to lose money by earning -$0.19 versus -$1.41 in the prior year. For the next year, the market is expecting a contraction of 731.6% in earnings (-$1.58 versus -$0.19).

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